FIN 415 Class Web Page, Spring '13

Term Project Part I
Term project part II

Weekly SCHEDULE, LINKS, FILES and Questions

Week

Coverage, HW, Supplements

- Required

WSJ Papers Reference

Videos (optional)

Week 1 –

Mar 5

Chapter 2

What is BOP? What is current account?

Can US devaluate currency to eliminate current account deficit?

Understand HW1.

What is European union? What is Euro zone?

Chapter 3

US is using floating exchange rate system. What is the advantage and disadvantage of this system? Did government intervene the foreign exchange market?

Who are the major players in the FX market?

Buying and selling of foreign currency in fx market.

“The Forex Bid Price

The Forex bid is the price at which you can sell a certain Forex currency pair for. The bid price is seen on the left side of the Forex quote. For example, for the EUR/USD quote 1.2728/31, the bid price is 1.2728. This means you can sell one Euro for $1.2728.

The Forex Ask Price

The ask price is the price that is set for the buying of the currency pair by the trader. The ask price is seen on the right side of the Forex trading quote. In the previous example of the EUR/USD 1.2728/31, the ask price is 1.2731. It means you can buy 1 Euro for $1.2731.”

Direct and indirect quote and cross rate

What is euro currency? What is LIBOR rate?

International stock market – What is ADR?

Euro Financial Crisis

Just focus on Greece and Spain.

What is going on in Greece and Spain during the crisis?

How did ECB rescue the two countries?

The results?

Capital Flow Chart

Understand the three major participants in financial markets

What are the solutions for the ongoing European financial crisis? Are they working? Why or why not?

What is your investment strategy in responding to actions taken by ECB?

European Financial Crisis Time Line

In Class Exercise

In Class Exercise Solution

HW-In class exercise HW

HW – Chapter 2

1. If the dollar is pegged to gold at U.S. $30 = 1 ounce of gold, and the British pound is pegged to gold at £6 = 1 ounce of gold.

What should be the exchange rate between U.S. $ and British £ ?

How much can you make without any risk, if this exchange rate is £1 = $6? Assume that your initial investment is $1,200.

2. Internet exercises (not required, for interested students only)

a. IMF, world bank and UN are only a few of the major organizations that track, report and aid international economic and financial development. Using these website, you can summarize the economic outlook for each country.

IMF: www.imf.org/external/index.htm

UN: www.un.org/databases/index.htm

World bank: www.worldbank.org’

Bank of international settlement: www.bis.org/index.htm

b. St. Louis Federal Reserve provides a large amount of recent open economy macroeconomic data online. You can track down BOP and GDP data for the major industrial countries.

Recent international economic data: research.stlouisfed.org/publicaitons/iet

Balance of Payments statistics: research.stlouisfed.org/fred2/categories/125

HW- Chapter 3

Question 6, 11 and 18 on page 86

1: EU fines Microsoft for broken promise

2: Chinese solar approach faces test

3: UK bank chief calls for RBS split

4: Banks are less stressed over capital plans

5: Companies race to raise cash

6: A Chinese lesson for Germany

Reference:

International Trade Statistics

Current Account (BOP) Data – World Bank

http://data.worldbank.org/indicator/BN.CAB.XOKA.CD

IMF, world bank and UN are only a few of the major organizations that track, report and aid international economic and financial development. Using these website, you can summarize the economic outlook for each country.

IMF: www.imf.org/external/index.htm

UN: www.un.org/databases/index.htm

World bank: www.worldbank.org

Bank of international settlement: www.bis.org/index.htm

St. Louis Federal Reserve provides a large amount of recent open economy macroeconomic data online. You can track down BOP and GDP data for the major industrial countries.

Recent international economic data: research.stlouisfed.org/publicaitons/iet

** Euro Crisis ***

ECB Time Line of Financial Crisis

http://www.ecb.int/ecb/html/crisis.en.html

The great Euro crisis 2012

http://www.youtube.com/watch?v=dyNekAJ6rA8

Week 2 –

Mar 12

Chapter 4

Trading Forex for Beginners - The Basics

http://www.youtube.com/watch?v=f6RE-9IZZEI

Chapter 5

Chapter 6 How Central Banks Move the Forex Market

http://www.youtube.com/watch?v=g82etHhTOnY&feature=related

HW Questions from chapter 2 to chapter 6

HW of chapter 4: 1,2,3,4,15,16,20 from page 116-118.

HW of chapter 5: 1, 2, 15,18, on page 147 and 148.

HW of chapter 6: 1 and 2 on page 196

Million Dollar Pips The Life Of A Day Trader

http://www.youtube.com/watch?v=unM_0Vh00K4

Foreign Exchange Market

http://www.youtube.com/watch?v=-qvrRRTBYAk

UFXMarkets Weekly Forex Currency Trading News

http://www.youtube.com/watch?v=PKnUmbL9IVY

Week 3 –

Mar 19

Tuesday classroom has moved to DCOB Conference room. The materials from the conference will be in the exam.

The class will start at 6:30pm and end at 8:30pm. The schedule is as follows.

Networking 6:30-7:00 p.m. (with light hors d' oeuvres)

Panel Discussion 7:00-8:00 p.m.

Q & A and event wrap-up 8:00-8:30 p.m.

Panel members:

· Dr. Don Capener, Jacksonville University, Dean College of Business

· Dr. Julius Demps, Jacksonville University, Assistant Professor of Management

· Mrs. Lelia Duncan, CEO of Community Connections

· Mrs. Marla Matson-Quattrone, Cathedral Arts

· Mrs. Terry Coleman, Deutsche Bank Director of Business Control

· Mrs. Wallette Stanford, JEA Senior Executive

Week 4 –

Mar 26

Prior Exam – first set

Prior exam second set

Prior Exam set three

Mid Term study guide (word file)

On Monday from 3pm to 6pm @ room 117, Q&A session. I will go through the prior exam questions.

Homework Due before Monday 12pm of March 25^th. Solution will be posted on Monday.

Mid Term

Diversification Video

(sorry my I-phone just allows me 30m of videotaping)

Short Answers (5*8=40)

Question 1: Baylor Bank believes the New Zealand dollar will appreciate over the next five days from XXX to XXX. The following annual interest rates apply:

Currenc Lend Rate Borrow Rate

Dollars XXX XXX

NZ$ XXX XXX

Baylor Bank has the capacity to borrow either NZ$XXmillion or $XX million. If Baylor Bank’s forecast if correct, what will its dollar profit be from speculation over the five‑day period (assuming it does not use any of its existing consumer deposits to capitalize on its expectations)?

Question 2: Given two direct quotes with respect to $ and one cross exchange rate, figure out a strategy to win.

Question 3: Similar to HW chapter 2’s gold value of foreign exchange rate.

Question 4: Given bid and ask quote, figure out losses if buy at ask and sell bid quote as an investors (note banks hold opposite position)

Question 5

How can you make money? Assume you start with $100. Given direct quote and cross quotes

Question 7: Buy stock in foreign market and figure out return based on new spot rate (easy, use your common sense)

Question 8: Based on discussions of Week3’s class (use common sense, you can still answer this question)

Question 6

The table below shows the bushels of wheat and the bottles of beer that North and South Dakota can produce per day of labor.

SD ND

Wheet X X

Beer X X

In what range must the "international" price of wheat fall? i.e. if North and South Dakota trade only with each other, what is the range of prices possible?

Mid Term Study Guide

(close book close notes)

Multiple Choices (40*1.5=60, total 42 questions)

1. Balance of trade concept

2. Currency value changes due to current account deficit

3. Currency value changes due to current account changes

4. The primary component of the current account is the:

5. The demand for U.S. exports tends to increase when:

6. A weak home currency may not be a perfect solution to correct a balance of trade deficit because:

7. Currency value change factors

8. Given direct quotes of two countries with respect to $, calculate cross exchange rate

9. Which of the following is an example of Eurobonds:

10. Which currency is used the most to denominate Eurobonds?

11. When the foreign exchange market time zone problem

12. Given direct quotes of two countries with respect to $, calculate cross exchange rate

13. ADR stock pricing

14. Bid ask quote problem

15. Gold standard problem

16. Currency depreciation or appreciation problem.

17. Factor that causes currency supply and demand schedules to change.

18. Interest rate changes and its impact in foreign exchange rate.

19. Demand and supply of currency

20. Interest rate changes and its impact in foreign exchange rate.

21. Fixed exchange rate and free floating system comparison

22. Inflation changes and its impact in foreign exchange rate.

23. Labor strike and its impact in exchange rate.

24. Demand and supply of currency

25. Inflation changes and its impact in foreign exchange rate.

26. Capital flow caused by interest rate changes

27. Forward contract total amount calculation question

28. Forward contract premium / discount question

29. Hedge currency risk using future contract

30. Comparison between forward market and future market

31. Using forward contract to hedge risk calculation question

33. Forward premium/discount question

33 Comparison between forward market and future market

34. Using forward contract to hedge risk calculation question

35. Comparison between forward market and future market

36 Comparison between forward market and future market

37. How can Fed control currency value?

38. Comparison between fixed rate system and free floating system

39. Concept about freely floating exchange rate system

40. If the Fed desires to weaken the dollar without affecting the dollar money supply, it should?

41. Today, the euro is one of the world's most powerful currencies, used by more than 320 million Europeans in twenty-three countries. The countries currently using the euro are:

42. Comparison between fixed exchange rate and free floating exchange rate systems

Week 5 –

Apr 2

Chapter 7 PPT

Chapter 7 In Class Exercise

Chapter 7 Excel Illusion

HW of chapter 7: 2, 4, 6,7, 21, 22

Interest rate parity (cartoon)

http://www.youtube.com/watch?v=MDwA_h18zI8

Week 6 –

Apr 9

Chapter 8